Another Step Toward a New Form of Student Union

Another Step Toward a New Form of Student Union

Scholarship Athletes Win Union Ruling

March 27, 2014

Summary

In a landmark decision that will re-invigorate the recent campaigning by student-athletes and their advocates for a greater role in the business of college sports, the Regional Director for Region 13 of the National Labor Relations Board (the “NLRB”) held yesterday that Northwestern University scholarship football players are “employees” under the National Labor Relations Act (“NLRA”), and are therefore entitled to choose whether to unionize. The Regional Director directed an immediate union election, noting the University’s right to appeal to the full NLRB.

This case has been closely watched. Since we first reported on the filing of this petition in February,[1] the NLRB has held a fact-finding hearing and rendered a decision.

The NLRA applies only to private institutions. This ruling has no direct impact on public colleges and universities, but there could be a ripple effect because state labor relations boards often follow NLRB precedents. The reasoning used in this decision would appear to only affect those scholarship student athletes in sports that generate net revenues, but could reach further. Because the NLRB applies the common law definition of “employee,” its conclusion, if accepted elsewhere, could influence claims by these students for workers compensation, minimum wage and overtime, and other employment protections.

The Regional Director’s ruling also means that the players at issue are “employees” entitled to all of the rights afforded by the NLRA, including the right to strike and engage in other “protected concerted activity” and, even if there is no election, cannot be subjected to unfair labor practices.

The debate over whether college sports programs should share revenue with student-athletes is not new. Yesterday’s ruling, however, makes clear the reality that this well-worn debate is turning into a challenge to higher education institutions’ existing systems, with Title IX implications, and impacts perhaps even beyond the student-athlete context.

The Petition

The NLRA establishes a legal process for “employees” of a private business “engaged in an industry affecting commerce” to choose an “exclusive representative” for purposes of “collective bargaining” in a “unit appropriate for such purposes.” Employees seeking to pursue bargaining rights (or an organization seeking to represent them) may file a petition with the NLRB. The NLRB determines if the NLRA applies, including whether the individuals are employees, the group is an appropriate unit, and the organization an appropriate representative. The burden is on the “employer” to show that there is no coverage. If the NLRB decides there is coverage and an appropriate unit, an election is then held to determine whether a majority of covered employees in the “unit” wants to be represented by the organization.

The NLRB’s review was initiated on January 30 when the Collegiate Athletes’ Players Association (“CAPA”), a group backed by the National Collegiate Players Association and the United Steelworkers union, petitioned the NLRB to allow “[a]ll football players receiving grant-in-aid athletic scholarships from Northwestern University” to form a union. While much of the public discussion has been about pay, CAPA states that compensation is not its focus. It claims that the scholarship compensation currently received by players is sufficient to show that they are already paid employees entitled to negotiate the terms of their “employment.” CAPA claims that it really wants to focus negotiations on such issues as preservation of scholarships for injured athletes, university responsibility for continuing medical care and other consequences of long-term or permanent injury.

But if this door is opened, the University would have to bargain with the union over all mandatory subjects covering wages, hours, and terms and conditions of employment, which could include many of the rules, policies and procedures applicable to student-athletes, as well as economic issues.

The Regional Director’s Ruling

A significant part of the 24-page decision are the factual findings from a five-day hearing. They include a detailed description of the typical day in the life of a football player in a major football program and the economics of major college sports. These findings and conclusions will not be surprising to even casual sports fans. The Regional Director then addressed and rejected four legal defenses by the University: (1) the athletes were not employees under the NLRA; (2) alternatively, they were temporary employees not protected by the NLRA; (3) CAPA was not a labor organization; and (4) the unit was not appropriate because it did not include walk-on players who receive no scholarships. The latter three issues are necessary to the conclusion, but the most novel holding is that these players are employees.

Under Supreme Court precedent, the NLRB must look to a common law definition of “employee” — “a person who performs services for another under a contract for hire, subject to the other’s control or right of control, and in return for payment.” The Regional Director cited to one NLRB decision finding that the Seattle Opera’s auxiliary choristers were employees, and distinguished the NLRB’s decision in Brown University, 342 NLRB 483 (2004), which found that a proposed unit of graduate students were not employees. The Regional Director discussed no other NLRB precedents in reaching the conclusion that scholarship football player met the common law definition of “employee” because scholarship players receive “compensation” under a “contract” to perform “valuable services” for the University, which are unrelated to their academic studies.

The Regional Director found that a scholarship player performs “valuable services” because the University reaps large economic benefits (approximately $235 million in gross revenues and millions in net revenues after expenses that subsidize other sports and other revenues through licensing) as well as “[l]ess quantifiable” benefits by way of the :immeasurable positive impact to the University’s reputation a winning football team may have on alumni giving and increase in number of applicants.” The Regional Director’s rationale for this part of the test would appear to limit the conclusions to students in sports that generate a net revenue or other substantial economic value to the University.

The Regional Director next held that the scholarship players receive a “substantial economic benefit for playing football,” and that this constitutes a “payment” for "services rendered". The Regional Director distinguished the Brown University graduate assistants because they received the same financial aid as other graduate fellows, and their aid was not tied to the quality of their work. In contrast, the scholarship players lose their aid if they quit playing football. This conclusion did not address other situations in which scholarship athletes do not lose their financial aid if they do not play or are injured, and that there is no direct fee-for-service link. The Regional Director held that scholarship players are under a “contract” to perform services because they sign agreements placing them under the strict and exacting control of the football program. Many of those rules are required by the NCAA.

The Regional Director distinguished this case from the BrownUniversity graduate assistants on several grounds. He found that football student-athletes are not “primarily students” based upon the amount of time spent on football compared to academics, and that football duties were not necessary to or a part of any academic studies.

What Happens Next?

The decision outlines the University’s right to request review and, according to press reports, Northwestern University intends to appeal the Regional Director’s decision. Any “appeal” must take the form of a Request to Review filed with the NLRB in Washington, D.C., which must be filed by April 9. The grounds for review are limited, but the NLRB will likely grant the University’s request due to the presence of a “substantial question of law or policy in light of the absence of, or the departure from, officially reported NLRB precedent.” The Request can be decided by the full Board or a panel of three. Given the degree of media attention, this case will likely go to the full Board.

According to the Board’s Rules and Regulations, the filing of such a request shall not, unless otherwise ordered by the Board, operate as a stay of the election or any other action taken or directed by the Regional Director. It is not uncommon for elections to proceed even when the Board agrees to review the decision. The NLRB’s ultimate decision on the substantive legal issues may not be issued for several months, although they presumably would rule more promptly on any request for a stay of the election pending the University’s appeal, should the University request a stay.

The NLRB may either affirm, reverse or remand the decision for further proceedings. Given the factual record, a remand for further findings is unlikely. Whatever the outcome, it is not easy to challenge the NLRB’s decisions in these types of cases. The NLRB takes the position that its decisions in such proceedings are not directly reviewable by the courts, and can only be challenged in a later unfair labor practice case. For example, if the NLRB affirms the Regional Director’s Order, there is nothing in the NLRA that gives Northwestern University the right to appeal or seek review in federal court. Typically, there would be a remand for an election by the scholarship players to choose whether to unionize. If the athletes vote to unionize, the University could only obtain review by the Court of Appeals by refusing to bargain with the newly-formed union, which would draw an unfair labor practice charge. Only after the NLRB finds the University committed an unfair labor practice could the University then proceed to court, and in that proceeding obtain judicial review of whether the players truly are “employees” within the ambit of the NLRA. If the University wins the election, the merits of the NLRA’s decision would have to wait for another case.

There is little precedent on the players’ rights if the NLRB dismissed the Petition. The Supreme Court has recognized a very narrow exception under which federal courts have jurisdiction to consider certain decisions made in representation cases, but this exception is rare. This process could take years to play out.

The Potential Impacts

As noted above, even if the NLRB agrees with the Regional Director, this decision may not have wide immediate implications. The NLRA does not apply to public institutions, and it is questionable whether many state public relations boards would follow this conclusion. The decision notes that only 17 of the more than 120 FBS Division I schools are private institutions. But a ripple effect on public institutions is likely in those states that allow unionization of employees of public colleges and universities under state law. At a minimum, large public institutions may have to defend against similar petitions under state laws.

The reasoning in this case is tied to those scholarship athletes who generate substantial net revenues or other economic benefits. Therefore, the reasoning would most closely apply to those football and basketball programs at larger schools. But it is foreseeable that if the NLRB affirms this decision, it could lead to renewed interest in union petitions by other groups of students beyond the athletics department who claim that they provide “valuable services” to a higher education institution in exchange for a scholarship. For example, many institutions derive economic benefits that are generated by student research and development of intellectual property.

For the scholarship athletes at elite private schools, the most immediate impact would be on the rights to bargain over terms and conditions of employment, and that schools would be precluded from unilaterally changing those terms. Determining what aspects of a player’s experience constitutes a “term and condition of employment” presents potential theatre of the absurd – coaches might have to bargain about number and length of practices; grooming codes; drug testing policies; attendance at off-season workouts, and, of course, wages and benefits (i.e. revenue sharing). The decision could also lead to challenges in other arenas under traditional employment laws such as worker’s compensation, minimum wage, overtime, and taxation.

The NLRA confers a panoply of rights upon employees beyond the right to organize for purposes of collective bargaining – this is true regardless of whether the employees have union representation. Thus, the players would be immediately protected from discrimination for engaging in protected concerted activity.

Beyond the direct impacts are the indirect impacts. A group of unionized players at a handful of elite schools would present serious challenges to the NCAA and the economics of football and basketball. Such changes could also have an indirect and adverse impact on a school’s compliance with Title IX by shifting revenue now used to support women’s sports.

Conclusion

Depending on what the NLRB rules, this decision by one Regional Director could disappear by fall, or still be working its way through the courts years from now. Whatever the outcome, this decision will provide additional momentum and incentive for institutions of higher education to begin to creatively deal with student-athlete concerns, such as medical care and other consequences of long-term injury, and to develop strategies to address the potential employment status of its student-athletes.

Robert Nagle is presenting as part of a panel on “NLRB Recent Rulings and their Impact” at the upcoming NACUA April 2014 CLE in Boston, Thursday, April 10, 3:00 p.m. This decision will be added to that program.